It has been about a month since the last earnings report for Canadian Solar (CSIQ). Shares have added about 2.9% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Canadian Solar due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Canadian Solar Q4 Earnings Top Estimates, Revenues Up Y/Y
Canadian Solar Inc. reported fourth-quarter 2020 earnings of 11 cents per share. The Zacks Consensus Estimate was pegged at a loss of 55 cents. However, the bottom line deteriorated 90.1% from the year-ago quarter’s earnings of $1.12 per share.
The year-over-year fall can be attributed to higher cost of revenues as well as operating expenses that the company incurred in the reported quarter compared with fourth-quarter 2019.
In 2020, the company reported earnings of $2.38 per share compared with $2.83 in 2019. Full-year earnings also topped the consensus estimate of $1.65.
Canadian Solar’s total revenues of $1,041 million outpaced the Zacks Consensus Estimate of $997 million by 4.3%. Net revenues in the reported quarter also comfortably exceeded the company’s guidance of $980-$1,015 million.
Moreover, the top line improved 13.2% from $919.7 million reported in fourth-quarter 2019. The improvement was driven by higher module shipments.
In 2020, the company generated revenues worth $3.48 billion, up from $3.20 million in 2019. Full-year revenues also surpassed the Zacks Consensus Estimate of $3.43 billion.
Solar module shipments in the quarter totaled 2,998 megawatts (MW), up 22% on a year-over-year basis but fell 5.4% from 3,169 MW in the third quarter of 2020. Shipments came in within the company’s guidance of 2.9-3.0 MW.
Gross profit amounted to $141.1 million, down 38.5% from the year-ago quarter’s $229.5 million. Gross margin was 13.6% in the quarter, indicating a contraction of 1140 basis points. However, it came above the guidance of 8-10%. The year-over-year gross margin decline was mainly due to the previously expected increase in manufacturing costs.
Total operating expenses were $138.6 million, up 17.4% year over year. Selling and distribution expenses totaled $64.1 million, up 28%. General and administrative expenses were $70.1 million, up 9.3% year over year.
Research and development expenses were $10 million, down 1.4% from the year-ago period.
Income tax benefit in the fourth quarter of 2020 was $2 million against income tax expenses of $25 million in the fourth quarter of 2019.
Interest expenses were $18 million, down from $19.7 million recorded in the year-ago quarter.
As of Dec 31, 2020, cash and cash equivalents totaled $1,178.8 million, up from $668.8 million as of Dec 31, 2019.
Long-term debt as of Dec 31, 2020 was $446.1 million, up from $619.5 million on Dec 31, 2019.
For first-quarter 2021, Canadian Solar expects shipments of 3.0-3.2 gigawatt (GW). This guidance includes approximately 300 MW of shipments to its utility-scale solar power projects that may not be recognized as revenues. Total revenues are projected within $1.0-$1.1 billion, while gross margin is expected in the band of 16-18%.
The Zacks Consensus Estimate for the company’s first-quarter revenues is pegged at $988.8 million, lower than the company guided range.
For 2021, Canadian Solar expects total module shipments in the range of 18-20 GW, while that for revenues lie in the band of $5.6-$6.0 billion.
The Zacks Consensus Estimate for the company’s 2021 revenues is pegged at $5.12 billion, lower than the mid-point of the company guided range.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted -400% due to these changes.
Currently, Canadian Solar has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Canadian Solar has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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